Magazine

Boeing's Sonic Bruiser

July 01, 2001

Many colleagues still remember the day that Harry Arnold, head of Boeing Co.'s (BA) electrical systems in the early '90s, challenged his boss, Alan R. Mulally, during a tense meeting about the design of the company's 777 jet. Mulally is not the kind to take public criticism well, and at the next staff meeting, he zeroed in on his former protege. "If you ever do that to me again, I'll get you," he said, according to people who were there.

And he did. When Mulally became president of the commercial jet unit in 1998, the first person he fired was Arnold. Now a senior executive at Goodrich Corp. (GR), an aerospace supplier, Arnold doesn't care to comment about the incident. Mulally, for his part, says of Arnold: "We thought he wouldn't be able to step up to the leadership job."

Getting in the way of Mulally has proven to be almost as dangerous as strolling across an airport runway. In his climb to become president and chief executive of Boeing's commercial jet business, Mulally, 55, has earned a reputation for bruising ambition and insistence on total control. "He wants to be top dog all the time," says a retired Boeing executive who knows Mulally well. Another former colleague describes his style of communication as "all transmit and no receive." Mulally is known for mentoring struggling employees--until they trip up. "I know that it will feel kind of hard on some people," he admits. "But when you are designing airplanes, you just can't mess around."

Now that he has promised to launch the first near-supersonic jetliner, dubbed the Sonic Cruiser, Mulally will have to be as dogged a salesman as he has ever been. And with complete autonomy over the $31 billion commercial plane division, he'll have to be as brash a manager, too. The technology and economic hurdles facing the $10 billion delta-wing plane are daunting enough. But Mulally faces far broader challenges: He has to keep the jet division, which generates 60% of Boeing's total $51.3 billion revenues, growing and churning out 10% profit margins. He is counting on a move into aircraft-service businesses to pay off. At the same time, he needs to slash costs, even while trying to galvanize a 78,000-plus workforce that is demoralized after recent layoffs and Boeing's decision to shift its headquarters from Seattle to Chicago this September.

Plenty of people believe Mulally is well prepared for the job. "It takes a big ego to run a large company," says Dick Albrecht, a retired Boeing executive. Indeed, the position of Chairman and CEO, now held by Philip M. Condit, 59, is Mulally's to lose over the next six years.

"I'M READY." Mulally's ascent owes much to a flat-out determination to succeed. Even as a young boy, he took himself very seriously. He would sit in the front pew at church in his home town of Lawrence, Kan., all the better to study how the reverend inspired the congregation. When Mulally was a teenager, he figured President John F. Kennedy's call to send Americans to the moon was a message for him. "I got in front of the TV and said, `I'm ready,"' Mulally recalls.

He wound up earning aeronautical and astronautical engineering degrees from the University of Kansas in 1969. But instead of heading into orbit, Mulally took his place among the lower ranks of Boeing's 15,000 engineers. In the three decades since, he has worked on every Boeing jetliner, including the defunct Supersonic Transport. Mulally led one of the most difficult jet development projects of the 1990s, the 777, which combined advanced control technologies and a twin-engine design to deliver impressive cost efficiencies. And in the 1980s, Mulally took charge of a successful industrywide effort to teach pilots how to handle the dangerous problem of wind shear. That led to a patent on a warning device, which Mulally shares with another engineer.

Mulally has also benefited from good timing. The 777, for example, came in at a much steeper price than Mulally's team had originally proposed to the board of directors. Double, in fact. But Boeing was doing well enough then that it could swallow the huge increase. Today, Mulally acknowledges that the 777 cost $6 billion more than he first estimated, but notes that the investment in various manufacturing technologies "has paid off handsomely for Boeing."

Former colleagues also say that on occasion Mulally has been willing, if not eager, to promote himself at the expense of others. In particular, they talk about how he somehow avoided taking any blame for the disastrous manufacturing problems he and his boss, Ron Woodard, faced at the commercial plane unit in the mid-1990s. It was clear that Mulally, then executive vice-president for engineering, was working "to replace Woodard," says a former Boeing executive who knows both men. Soon after, Mulally found himself in the defense and space division, where he could safely watch as Woodard struggled. In 1998, Mulally took over Woodard's job.

Once he was in charge, Mulally concentrated on resolving those manufacturing snafus and reviving the group's morale. He started by focusing on the numbers--handing program managers direct responsibility for profit and loss and sharing financial, production, and sales information among them. "Alan has taken a seriously troubled company and begun to significantly improve it," says Richard J. Glasebrook II, managing director of Oppenheimer Capital, which owns about 9 million shares of Boeing.

Mulally worked his charms on the unions, too. The same group of engineers who picketed his office last year during a 40-day strike cheered him recently as he urged them all to pull together. "I think he's the best chance we've got," says Charles Bofferding, executive director of the Society of Professional Engineering Employees in Aerospace.

Now Mulally has a chance to distinguish himself in a way he never has before. But developing the Sonic Cruiser, which will fly just below the sound barrier and cut air time by 20%, is a risky endeavor. And with Europe's Airbus Industrie projected to deliver more planes than Boeing by the end of the decade--thanks in part to its new jumbo jet, the A380--a wrong move could cut short Boeing's leadership in commercial aviation. Experts, including some within Boeing, question whether it even makes sense to travel close to the speed of sound, citing the huge amount of fuel that is required to get through unpredictable airflows. "You couldn't pick a worse place to fly," says Bob Withington, Boeing's former vice-president for supersonic transport. "Even if you could do it, I'm not sure why you would want to. The time-saving isn't all that great."

Mulally says the 16 airline executives he has talked to believe it is. "If we can be in the same range on economics as airplanes today and offer a 20% advantage in speed, we've got a home run," he says from the Paris Air Show. "People will pay for speed." More than his crucial work on Boeing's 777, and more than his success at turning around the company's biggest unit, this plane, he says, will bring him what he desires--"to be remembered as one of Boeing's many great leaders." Considering the steep challenges that Boeing faces, Mulally's soaring ambition may be just what the company needs. By Stanley Holmes in Paris